Exchequer joins Advanced in £110m CSH deal

Advanced Computer Software Group plc has acquired Computer Software Holdings (CSH), the current owner of IRIS Exchequer, for £110m in cash from private equity house HgCapital.

The deal represents a return to her roots for Advanced CEO Vin Murria, who ran several of CSH’s health and not-for-profit (NFP) divisions until her Computer Software Group merged with IRIS in 2007. She subsequently left the organisation and began building up a new software empire at Advanced, bringing along CFO Barbara Firth and ex-CSG (and Sage) chairman Michael Jackson along for the ride.

“It’s an unusual situation to find ourselves in. It’s been six years since we had the business,” Murria told AccountingWEB. “We saw opportunity to grow our managed services and business solutions business and we took it. It was the right software, the right size and the right business.”

HgCapital was the main backer of IRIS’s expansion drive, and oversaw a split in 2011 that saw CSH and Exchequer separate from the IRIS tax/practice and payroll wing, which now operates independently as IRIS Accountancy Solutions.

CSH, meanwhile, specialises in accounting and back office software for UK legal services providers and coroners, the healthcare industry, and CRM software for the charity market.

The Hg-engineered IRIS demerger opened the door for Murria. “I started talking to them immediately. They weren’t interested, but I carried on talking and carried on talking and eventually they said, ‘You know, we just might,’” she said.

With Exchequer now in the portfolio, Advanced has a new point of entry into the mid-market, she continued.

“Exchequer takes us slightly lower into the marketplace. Still above Sage and IRIS, and below SAP and Oracle, but our core sweet spot,” explained Murria.

Murria’s message to Exchequer users was that they had nothing to fear: “We are a pure play software business, built around a core accounting business. Now we are probably one of the largest UK software businsses - this will be good for them. It will enable customers to move to cloud if they want and there are lots of cross-over products that we can take to them. We’ve got Collaborative Planning, Business Analytics, and document management from V1.”

She also said Advanced planned to make CSH’s charity-focused CRM system a more generic product that could be spread across its portfolio.

As well as providing a good fit with the existing Advanced products and markets, Murria explained:

“What CSH gives us is scale. It gives 615 employees… offices in the UK, Ireland and a footprint in the USA. More importantly it brings 12,000 customers to our portfolio.”

CSH’s turnover to December 2012 was £61.5m, she continued, with £13.2m Ebitda.

“It is hugely earnings-enhancing from day one and it is very supportive of the two sectors that we support greatly: managed services and business solutions,” she said in a YouTube video interview (see below).

The combination will generate over £160m recurring and repeating revenues, with two-thirds of its earnings coming from business solutions, 18% from the health & care market and 14% from managed services.

While CSH’s flow of cash will help pay down the group’s post-deal net debt of £65m, Advanced expects to reap £1.4m of early cost savings and will look for another £1m worth of “synergies” within 18 months.

But, Murria explained, “The whole focus is not on cost cutting. It’s about growing it. Exchequer is a great opportunity; we’ll really target growth and put technology and resources to make that happen.”

The Advanced board is being reorganised in the wake of the CSH acquisition. Current chief operating officer Paul Gibson will take over responsibility for operations across the group, while CFO Barbara Firth Barbara Firth will become COO with responsibility for acquisitions and integrating CSH into the group structure. Having served as CFO at CSG for eight years, “it’s a perfect role for her to oversee the integration”, Murria said.

Guy Millward, one of the group's non-executive directors and former FD at COA Solutions, will take over as CFO. “I worked with him 11 years ago at Kewill,” said Murria. “We’ve both moved around since then, but I know he is a good guy.”

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